Investors who believe the worst of the tariff news is over may be celebrating prematurely, according to Adam Parker, founder of Trivariate Research. Uncertainty around President Donald Trump’s high tariff policies bogged down markets in March and April, sending the S & P 500 almost 19% from its all-time high in February to the April 8 close. But stocks made a steady comeback in the past month as investors assumed the tariff picture would only grow clearer and less burdensome in the future. The S & P 500 has rallied 14% since April 8 and is now down less than 4% on the year. But in a research report released Sunday, the former chief U.S. equity strategist at Morgan Stanley warned investors against being too optimistic in the near term. “We are MORE NEGATIVE now than we were two weeks ago. After all, the S & P 500 is down only 3.3% year-to-date after this huge rally, and there is no doubt in our minds that conditions are meaningfully worse and more uncertain now than they were at the beginning of the year,” Parker wrote. “We would be cautious about thinking that all the negative tariff news is in the price. If you want to be contrarian, be more cautious, as the consensus has decidedly shifted to the positive given the huge rally in the market.” Parker pointed to several catalysts behind the consensus optimism, such as a belief that trade tensions between the U.S. and China will ease. In addition, the first-quarter earnings season started off on a strong note, even as some notable disappointments such as airline stocks removed their forward financial guidance and others revised their forecasts lower. Parker attributed stronger-than-expected earnings to consumers buying products before the full impact of tariffs kick in. “Sure, there is ample evidence to suggest that the stock market can rally even as bottom-up earnings estimates are downwardly revised. But, estimates that are for higher-than-normal seasonal growth, six months lagged from tariffs? That seems unlikely to us,” he wrote. “We think it is more logical that there was some pull-forward in demand, and that there is a 3-9 month lagged impact between the tariff announcements and the ‘maximum impact’ on the [profit and loss statements] of many S & P 500 companies.”
